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Problem:
Nile Holdings
Selected financial information as of Dec. 31, 2017
Last year's EBIT (2017)
$175.0 million
Expected EBIT (2018)
$189.8 million
Current portion of existing long-term debt, due 2015
$34 million
Interest due in 2015 on existing debt
$36 million
Tax rate
35%
Common stock price per share
$50.00
Common shares outstanding
20 million
Dividends per share
$2.00
Please refer to the financial information for Nile Holdings above. Nile must decide how to finance a $100 million investment. Suppose Nile expects $4.52 in EPS next year if it does not go through with the investment and associated financing. As a shareholder, to satisfy its funding needs for the investment opportunity, do you prefer the company issue $100 million in new debt at an interest rate of 7% and a payment of $20 million due on the debt next year or issue 2 million shares of equity at a target price of $50? Show supporting calculations and provide arguments and potential counter-arguments for your recommendation.
Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..
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